Overview of Kalbe Farma (KLBF)

Kalbe Farma (KLBF), Indonesia’s largest pharmaceutical company, stands as a leader in producing and developing pharmaceutical products for both human and animal healthcare. With a market capitalization of Rp60,234.5 billion (approximately US\$3,711.8 million) and a robust market presence, KLBF continues to be a significant player in the healthcare sector. The company’s share price was recorded at Rp1,285 with a target price set at Rp1,800, indicating a potential upside of 40.1%.

Financial Performance and Forecasts

2024 Performance Highlights

Kalbe Farma has projected a 17.2% year-on-year (yoy) growth in net profit after tax (NPAT) for 2024, aligning with consensus forecasts of around Rp3.2 trillion. The company’s indicative sales growth for 2024 stands at 7.2% yoy, suggesting an expansion in margins. The pharmaceutical segment is expected to see a 12.3% sales growth in 2024, driven by strong performance in oncology, biologics, and unbranded generics, which grew by 14-16%.

2025 and Beyond

For 2025, KLBF anticipates an 8-10% yoy growth in both sales and NPAT. The company also plans to maintain a dividend payout ratio of 45-55%, assuming an exchange rate of Rp16,100 and a 5% GDP growth. Notably, the consumer health and distribution segments are expected to witness robust growth, while nutritional sales may remain flat.

Key Growth Drivers

Pharmaceutical Segment

The pharmaceutical division is projected to grow by 12.3% in 2024. KLBF’s oncology, biologics, and unbranded generics categories remain strong performers. Notably, the company has six biosimilars and three novel biologics, including Zerpedio, Efesa, and Efepoetin Alfa. Zerpedio has already been approved by Thailand’s FDA, and KLBF has collaborated with Allianz Pharma for distribution in Thailand.

Consumer Health

The consumer health segment is expected to record a 6.6% sales growth in 2024, supported by a recovery in export sales of ExtraJoss. KLBF commands a dominant market share in several categories, including a 46% share in anti-diarrhea (Entrostop), 72% in antacids (Promag), 50% in cough remedies (Komix and Woods), and 39% in cold remedies (Mixagrip and Procold). Additionally, it holds a 48% share in health supplements (ExtraJoss) and 40% in children’s multivitamins (Sakatonik).

Nutritional Segment

The nutritional division faced challenges, with a 2.1% decline in sales due to intense competition. While the powdered milk market saw a 3.1% decline in value, liquid milk is gaining traction. KLBF may explore opportunities in this segment. However, its affordable product Chil-Fo and Hydrococo beverage continue to grow at 10-15% annually.

Distribution and Logistics

KLBF’s distribution and logistics segment grew by 11.2% yoy in 2024. With increasing demand for medical devices like mobile X-rays, CT scans, dialysis machines, and endoscopy equipment, this segment is poised for stronger growth in 2025.

Biotechnology and Cost Management

Biotechnology Drug Development

KLBF has strategically entered late-stage Phase 2 biotechnology drug development to mitigate risks associated with commercialization. The licensing strategy enables a diversified portfolio, leveraging a higher success rate for late-stage development.

Cost Management

A significant portion of KLBF’s raw material costs is now denominated in the Chinese renminbi, reducing exposure to US dollar fluctuations. As long as the renminbi weakens in tandem with the US dollar, KLBF’s margins are expected to remain stable.

Valuation and Recommendation

UOB Kay Hian maintains a BUY recommendation for KLBF with a target price of Rp1,800, derived using a historical five-year average PE of 23.3x applied to 2025 EPS. With the stock currently trading below -2SD PE, there is a projected upside of 40.1%, making KLBF an attractive investment in the pharmaceutical sector.

Earnings Sensitivity Analysis

KLBF’s earnings are sensitive to several factors:

• A 5% increase in average selling price (ASP) could boost 2025 NPAT by 39.2%.
• A 5% increase in sales volume could raise 2025 NPAT by 15.2%.
• A 5% increase in costs could lower 2025 NPAT by 34.4%.
• A 5% depreciation of the Indonesian rupiah against the US dollar could reduce 2025 NPAT by 18%.